Resources and Capabilities



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Sun River Beverage Co. Internal Analysis

The purpose of this analysis is to identify Sun River’s resources and capabilities and identify the resources that are a source of sustained competitive advantage for Sun River.



Resources and Capabilities

Sun River has an extensive list of resources and capabilities that we have identified. Within these resources some are valauble for the firm and others are not valuable and actually serving as a disadvantage for Sun River. In Figure 1, we list the positive and negative resources in each of the four major categories of resources.



Financial

Sun River had both positive and negative financial resources. Their stock has shown a very strong performance due to high investor confidence and this has allowed them to pay a very low cost of capital. Their capital sturcture is also very favorable with 70%Equity and 30% Debt. All of these are very valuable financial resources. Some negative financial resources were their cash flow risk due to the price of commodities and also sluggish sales in the last year. Figure 1 is a more complete list of these resources.



Physical

Sun River has a wide array of physical resources. They own their own bottling equipment as well as bottling plants and distribution centers and a very extensive fleet of trucks. Some of the negative physical resources are that they are currently only present in 86% of the markets that are available to them, and much of their business is U.S focused, even when many competitors are globally focused. Figure 1 lists these resources more completely.



Human

Sun River also has many human resources within their organization. The company as a whole has been in the soft drink industry for 23 years and has that experience to help guide them. Their computer technology team has won awards for their abilities. Their strong management team has been very forward thinking and accurate with forecasting their future, and this is shown through their investors confidence in their future. Although lately its seems that they have become more reactive and less innovative. Even with their 23 years of soft drink experience they have very limited experience in the energy drink market, and entrance into this maket could be a negative for the company. Figure 1 is a more detailed list of these resources.



Organizational

Some of the positive organizatinal resources for Sun River is their very strong reputations. The company as well as their products are seen in a very positive light and that is very valauable for Sun River. Also their strong Marketing program, which is highly responsible for their favorable image. Some negatives are their lack of innovation lately in which has led them to become very conservative and only enhance their Synergy product rather than creating a new product. Figure 1 lists all of these organizational resources.



Applying VRIO Model

Upon identifying the different resources and capabilities that are present in the firm, the next step is to apply the VRIO model to the positive resources and capabilities to determine if they are a source of competitive advantage. The questions to determine if there is a competivive advantage are as follows:



  • Is the resource valuable?

  • Is the resource rare?

  • How costly is it to imitate?

  • Is the resource exploited by the organization?

In Figure 2, below we have listed all of the resources and their answers to the questions in the VRIO model. The figure also shows the competitive position that we believe each of the resources hold for Sun River.

Sustained Competitive Advantage

Resources that are valuable,rare and costly for competitors to imitate are likely sources of a sustained competitive advantage if the organization is positioned to exploit the advantage. The following resources were identified for a high potential to serve as a sustained competitive advantage.



Capital Sturcture

Sun Rivers’s capital structure is very valuable because it consists of 70% equity and only 30% debt. The debt is easily backed by their extensive base of fixed assets. This allows for them to have a very low cost ofcapital and gain high tax shields. Sun River’s ability to gain such positive results from this capital structure leads us to believe that it is very rare. In order to build a capital structure of mostly equity, it is very costly and takes years to build. Its easily attributed to path dependence because they had to take very specific steps to gain this. These attributes serve to conclude that Sun River’s capital structure can serve as a sustained competitive advantage for them.



Loyal Customer Base

A loyal customer base is very valuable for a firm from a financial standpoint. Sun River has done a superior job in identifying who their customer base is and specifically targeting that group in all that they do. This has resulted in a very loyal customer base. The loyalty of a customer base is very rare for a firm and cherrypickers are very common in this industry. It takes a huge investment and research to gain a loyal customer base, therefore Sun Rivers’s loyal customer base has positioned them to have a sustained competitive advantage.



Favorable Reputations

Sun River as a whole and their products have favorable reputations. These reputation are very valauble for a firm perception and factor into many decision that many stakeholders make about the company. Their reputation about their products as being “healthy and vibrant” is very rare and sets them apart from their competitors. It would take a huge outlay of resources for another firm to imitate such a reputation, therefore Sun River’s reputation serves as a sustained competitve advantage for them.



Internal Analysis Figure 1

Internal Analysis Figure 2

Resource

Valuable?

Rare?

Costly to Imitate?

Exploited by Organization?

Competitive Expectation?

Low Cost of Capital

Y

N

-

-

Parity

High Stock Performance

Y

N

-

-

Parity

High Investor Confidence

Y

N

-

-

Parity

Capital Structure: 70% Equity, and 30% Debt

Y

Y

Y

Y

Sustained CA

Bottling Equipment

Y

N

-

-

Parity

4 Bottling Plants

Y

N

-

-

Parity

12 Distribution Centers

Y

N

-

-

Parity

Extensive fleet of trucks

Y

N

-

-

Parity

Strong in house sales force

Y

N

-

-

Parity

Strong relationships with retailers

Y

Y

N

-

Temporary CA

Award Winning Computer Tecchnology program

Y

Y

N

-

Temporary CA

Strong Management

Y

N

-

-

Parity

23 Years of soft drink experience

Y

N

-

-

Parity

Strong Marketing Program

Y

N

-

-

Parity

Loyal Customer Base

Y

Y

Y

Y

Sustained CA

Reputation- Friendly and Sensible

Y

Y

Y

Y

Sustained CA

Reputation- Products as healthy and vibrant

Y

Y

Y

Y

Sustained CA


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